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Sennheiser: Motivated by the customer

mittelstand columnGerman engineering has an outstanding reputation worldwide for quality, technological innovation and reliability, yet in the obsession for perfection, it can miss market opportunities.

The German watch industry, for example, with its hundreds of companies, has for long had a fixation for mechanical perfection, but in the process neglected the design aspect and the very quartz technology it had developed on its own. Similarly, Siemens had a head start in the field of fax machine technology but didn’t quite recognize the potential. Japanese entrepreneurs, however, capitalized on both innovations and developed marketable products, and achieved global dominance. Another German company, audio specialist Sennheiser, once held the patent for the answering machine but the lucrative market was given away to competition.

Precisely the case of Sennheiser makes it clear why so many medium-sized companies resist the temptations of diversification and remain restricted to their limited focus. These companies want to be the leaders in their segment, but neglect other aspects of the business. At Sennheiser, the guiding mission is the “Pursuit of Perfect Sound”, and in the process of striving for the best sound possible, it’s easy to overlook the potential of products like the answering machine or the baby phone.

No one who travels to the rural town of Wennebostel in Lower Saxony would ever imagine that an enterprise, which has been awarded Grammies, Emmys and even an Oscar, is located there. And a visitor to the executive management office would find it even more surprising that CEOs Andreas and Daniel Sennheiser don’t have private offices, but prefer instead an open-space office.

And in the halls of the new Innovation Campus, which will be opening very shortly, one won’t find individual workers but rather diverse teams working together on projects – and the language they there will be English, just as it is throughout the company. When customers such as Sting, Seal or Pink stop by for a visit, they’re often surprised to see that employees from Sennheiser play their own band at company events.

Today, pursuing perfect sound at Sennheiser means being a company that is more strongly motivated by the customer. Engineers still play a decisive role, but less than that by half of the employees, who are technicians and production specialists, while communication with the consumers is a top priority. The goal is the outstanding sound that the most demanding customers are looking for. When a world-famous star such as Pink flies through the air on cables as part of her stage act, signal transmission becomes an areal challenge for the sound technicians.

If a medium-sized company desires to become a global leader, it needs a passion for brilliance. It needs to offer much more than just quality. This can only be achieved by establishing log-term relationships with highly demanding customers. At Sennheiser, these customers are typically professional sound technicians and musicians. They challenge the company and give Sennheiser the opportunity to learn from their expectations.

Andreas Sennheiser comments: “Our professional clients are often unable to say exactly what they need. They come to us and say, “I dream of doing this or that, but the present technical possibilities don’t allow it.” This gives us the opportunity to understand what the artists want so that we can develop an appropriate solution.”

The company’s image has been elevaed through its experience in providing the technology for live television and music broadcasts, seen by hundreds of millions of viewers in the best possible quality: For 26 years now, Sennheiser has been solely responsible for the Eurovision Song Contest as well as for the Grammy Awards, apart from many other major events. On the other hand, expanding globalization has made it necessary to understand the varying expectations of extremely diverse customers: In the United States headphone-buyers place great importance on design, while Japanese customers expect very high standards with regard to product workmanship; German consumers value technological perfection, and in India a market for premium headphones didn’t even exist until 2004.

Such widely diverging customer expectations make it more and more necessary to rethink the typically perceived boundaries and coordinate the activities of the departments of Research and Development, Production, Marketing, Sales and Distribution, and Service. When Fritz Sennheiser founded the company in 1945, he kept operations limited to the national level, but after his son took charge in the 1980s, he successfully branched out into the international markets, primarily through a strategy of export. Presently the third generation is pursuing a multinational strategy, which has reached a new level of complexity. Daniel Sennheiser explains: “For a while now we have been fostering empathy in our dealings with one another. One of our senior executives recently spent half a year at our American office. Another was in Singapore. An employee from our team in Silicon Valley went to Zurich, and someone from our location in Holland was just sent to Australia. Our rule of thumb is to seek out the best-qualified person for the job. For us internationalization also means giving up control and opening ourselves to outside influences. Our local employees play a larger role in the decision-making process than they once did.”

Highly revealing is Andreas and Daniel Sennheiser’s answer to the question as to what it means to be a medium-sized company: “It’s a mind-set – a company culture that determines how we behave towards one another and how we approach things. In our case, it also means that the company is completely owned by family members and that the Sennheiser family runs the company. This is a big advantage for us as well as for the customer, because it has a positive effect on how we treat one another as well as on our long-term perspectives. It’s important to us to retain a high equity ratio and not to bounce from one financial quarter to the next. Some might say that we have an aversion to taking risks. Our philosophy is that the only risks worth taking are those, which won’t endanger the stability of the company, and this strategy has worked well for us throughout Sennheiser’s history. Since its founding, our company has achieved growth every year, and only once in 2009 did we experience a drop in revenue of one percent.”

Copyright © Winfried W. Weber, Mannheim, 2014-08-17

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